Choose the correct statements -

(A) The financial statements of a business enterprise include cash flow statements.

(B) Common size statements and financial ratios are the two tools employed in vertical analysis.

(C) Financial analysis helps an analyst to arrive at a decision.

(D) Comparative statements are the form of vertical analysis.

Choose the correct answer from the options given below:

Statement (A): The financial statements of a business enterprise include cash flow statements.

This is correct. The complete set of financial statements consists of Balance Sheet, Statement of Profit & Loss, and Cash Flow Statement. Cash Flow Statement is mandatory for certain companies and forms an integral part of financial statements.

Statement (B): Common size statements and financial ratios are the two tools employed in vertical analysis.

This is correct. Vertical analysis examines the relationship between different items in a financial statement of the same period. Common size statements express each item as a percentage of a common base figure (like total assets or sales), and financial ratios establish relationships between different items - both are key tools of vertical analysis.

Statement (C): Financial analysis helps an analyst to arrive at a decision.

This is correct. The primary objective of financial analysis is to provide meaningful information that helps stakeholders (investors, creditors, management) make informed economic decisions regarding the business.

Statement (D): Comparative statements are the form of vertical analysis.

This is incorrect. Comparative statements are a tool of horizontal analysis, not vertical analysis. Horizontal analysis compares financial data across different time periods (like 2023 vs 2024), showing changes in absolute amounts and percentages over time. Vertical analysis, on the other hand, analyzes relationships within a single period.